Uptrend in market sentiment following Ismail Sabri’s appointment as PM

BURSA Malaysia total weekly trade has indicated an increase in trading activity of +3.71% during the week that Datuk Seri Ismail Sabri was announced as the 9th Prime Minister of Malaysia and +9.23% for the following week.

From August 9 to August 27, all three indices increased: FBMKLCI by +6.24%, FTSE Bursa Malaysia 100 by +5.28% and FTSE Bursa Malaysia Emas by +5.11%.

UOB Kay Hian Wealth Advisors Sdn Bhd head of investment and financial planning Mohd Sedek Jantan said that these positive numbers demonstrate that the appointment of a new prime minister and a new Cabinet were aligned with market expectations.

“Besides, the meeting last week with opposition leaders to propose political changes and to focus on how to tackle the coronavirus outbreak and boost the economy reduced the political instability that has influenced market sentiment,” he told FocusM.

Mohd Sedek

However, Mohd Sedek also warned that market sentiment is not only influenced by political stability especially among foreign investors, as they also want to know how the Government intends to reduce the high number of confirmed COVID-19 cases as these will impact future returns on investment.

“The progress of the COVID-19 immunisation programme is vital in improving investor sentiment,” he remarked, adding that the new appointment of Khairy Jamaluddin as Health Minister is expected to boost the national COVID-19 immunisation programme (PICK).

Khairy previously served as the Science, Technology and Innovation Minister and also as the co-chair of the special COVID-19 vaccine committee (JKJAV) during former Prime Minister Tan Sri Muhyiddin Yassin’s administration.

“In my opinion, under the new leadership in the Health Ministry, at least 70% of the Malaysia population will be vaccinated by 4Q 2021.

“First, foreign investors are also interested in the upcoming budget, which will be tabled on October 29.

“The Government needs to ensure the budget is aligned with all eight existing stimulus packages (from PRIHATIN to PEMULIH). Besides, the budget needs to be comprehensive, covering all economic and social sectors.

“Second, the Government may introduce another round of the stimulus package (possibly as part of the budget in 2022) to support the recovery program and to ensure that there is a sustainable recovery.

“Third, the reappointment of Datuk Seri Tengku Zafrul as Finance Minister, Datuk Seri Azmin Ali as MITI (Ministry of International Trade and Industry) Minister and Datuk Seri Mustapa Mohamed as Minister in the Prime Minister’s Department for Economic Affairs will provide continuity of the existing recovery plan.

“These three things will give foreign investors more confidence in the local economy. Thus, foreign direct investment is expected to start recovering in early 2022.”

‘Business as usual’ approach for the economy

The previous movement control orders (MCO 1.0, 2.0 and 3.0) had forced numerous non-essential businesses to close, and in the process, many Malaysians had lost their income or even their jobs.

Based on estimates of Household Income and the Incidence of Poverty report released by the Department of Statistics Malaysia (DOSM) in early August this year, an additional 12.5% of households had an income of less than RM2,500 in 2020.

Moreover, 20.0% of households from the M40 group with an income between RM4,850 and RM10,959 moved to the B40 group.

Households in the T20 group were also affected by the COVID-19 pandemic, as 12.8% of those in this group shifted to the M40 group.

As the percentage decrease in income for the B40 and M40 households was larger than that for the T20 households, the income distribution for B40 and M40 declined to 15.9% (2019: 16.0%) and 36.9% (2019: 37.2%), respectively.

“Economic downturns are associated with mental health disorders and suicides. An increase in the unemployment rate is associated with a higher prevalence of depression, alcohol and other substance use disorders, and suicides,” Mohd Sedek opined.

“Hence, the decision made by Government to reopen economy was able to soften the impact, and this is especially in terms of financial impact.

“If the new Government can prevent the spread of the COVID-19 pandemic, the reopening of various economic sectors can be a two-pronged strategy.”

As the Government eases some of the restrictions, then consistent COVID-19 testing, access to vaccinations and transparency in reporting are a must, added Mohd Sedek.

This is supported by a study done at the Cheung Kong Graduate School of Business in Beijing which analysed how internal policies (i.e. social distancing, contact tracing and self-quarantining) and external policies (ie travel restrictions, capacity quotas, quarantines and testing) as reopening strategies could impact the economy.

“A simultaneous relaxation of both types of policy may lead to both a new wave of COVID-19 and large economic costs,” he justified. – Sept 1, 2021.

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